Unit price is the smallest interesting number in a Thailand sourcing decision. Total cost of ownership is what your finance team should be approving, and it is where the import-versus-manufacture question is actually settled.
The TCO stack
| Layer | Typical items | Where buyers underestimate |
|---|---|---|
| Acquisition | Unit price, tooling, samples, engineering change | Tooling amortisation and ECO fees |
| Logistics | Freight, insurance, duty, brokerage, drayage | Demurrage, chassis and peak-season surcharges |
| Quality | Inspection, rework, scrap, warranty, recall reserve | Field failure and returns handling |
| Inventory | Safety stock, in-transit, obsolescence | Cash cost of a 45-day ocean pipeline |
| Management | Travel, translation, QA headcount, audits | Your own team's hours |
| Exit | Re-tooling, re-qualification, last-time buy | Almost always ignored |
A workable model in six lines
- Landed unit cost = ex-works price + freight and duty per unit + inbound handling.
- Add quality cost per unit from your defect rate and rework standard — the method is in the cost of poor quality guide.
- Add inventory carrying cost: average units on hand and in transit multiplied by your cost of capital.
- Add tooling divided by the realistic volume over the tool's life, not over the optimistic forecast.
- Add management cost: annual sourcing hours, audits and travel divided by units.
- Add an exit reserve — a small per-unit accrual that funds a future transfer.
Run it once for the import scenario and once for the manufacture scenario. In most first-world programmes, manufacturing wins above a volume threshold and loses below it; the make-or-buy framework sets that threshold.
Where Thailand specifically changes the numbers
- Duty exposure varies sharply by destination and HS code; confirm preferential rates under the FTA that applies to your market before modelling.
- Eastern Seaboard plants generally give shorter drayage to Laem Chabang than Central-region plants, which moves both freight cost and lead-time buffer.
- Payment terms are typically tighter than in China for new buyers, which raises working capital in year one — see the cash cycle guide.
- Minimum order quantity drives obsolescence risk. Model it with the capacity and MOQ guide.
Reviewing TCO, not price
Price is renegotiated annually; TCO should be reviewed quarterly with the same data you use for your supplier scorecard. A supplier who holds price while their defect rate doubles has raised your cost. A supplier who raises price 3% while cutting your inspection load may have lowered it.
Common modelling mistakes
- Using the forecast volume instead of the shipped volume for amortisation.
- Ignoring the cost of your own team's time.
- Treating air-freight rescues as one-offs when they happen every quarter.
- Leaving out currency: quote in one currency, budget in another, and the gap becomes a surprise.
- Comparing an audited Thai supplier against an unaudited alternative as if the risk were the same. Fix that with the factory audit checklist.
Frequently Asked Questions
What should a Thailand sourcing TCO model include?
Landed unit cost, tooling amortised over realistic volume, quality cost, inventory carrying cost, management and travel overhead, and an exit reserve for a future transfer or re-tooling.
How do I compare importing finished goods against manufacturing in Thailand?
Build the same TCO stack for both scenarios and find the volume where they cross. Below the crossover, importing a catalogue product usually wins; above it, dedicated manufacturing wins.
How much inventory cost should I assume for ocean freight from Thailand?
Model the full pipeline: production lead time plus ocean transit plus port and inland time, then multiply the average units in that pipeline by your cost of capital. For most buyers that is a meaningful per-unit number, not a rounding error.
Does a lower unit price from a new supplier lower TCO?
Not automatically. A new supplier adds qualification, audit, first-article and elevated early defect cost. Model the first twelve months separately from steady state.
How often should TCO be recalculated?
Quarterly alongside supplier performance review, and immediately after any tariff change, freight-rate shift or engineering change.